Home Depot (HD) and Lowe’s (LOW) were both hurt by a slow start to the spring-cleaning season and a softer housing market last quarter, and neither HD stock nor LOW stock is having a good year.

HD stock is off 5% for the year-to-date, while LOW is down 9%. Home Depot and Lowe’s face the same economic headwinds of weak consumer spending and a slowdown in the housing market, but they each have their specific strengths and weaknesses as well.

HD and LOW are both claiming that sales were flat last quarter because weather delayed the start of spring cleaning.

But there’s more to it than that. As we’ve noted before, shoppers are reluctant to part with their discretionary income. Weak job growth — mostly in low-paid positions without benefits — stagnant wages and job insecurity are not a good combination for retailers. Indeed, retail sales rose just 0.1% in April.

One thing HD and LOW stock have going for them is that the weather excuse for weak sales is mostly true. Both companies said revenue bounced back in May and they’re on track to make up sales lost in earlier months.

But if you had to chose one — HD stock or LOW stock — to bet on the home improvement sector, which looks like the better buy? Let’s take a look:

HD Stock

Home Depot, the largest home improvement retailer, announced revenue that missed Wall Street estimates last quarter, but that’s been a pretty common occurrence this earnings season. More importantly, earnings exceeded analysts’ average estimate by 2 cents per share, according to a poll by Thomson Reuters.

The earnings beat was driven by cost cuts and a lower share count. HD said it will repurchase another $3.75 billion worth of Home Depot stock over the remainder of the year. Once sales bounce back — HD describes May business as robust — earnings will get a further boost. That’s part of the reason why HD was able to raise its outlook.

The slower housing market is more worrisome for Home Depot and HD stock, but the company is well positioned to manage it. HD is effectively reducing costs, allowing for margin expansion even amid somewhat lower demand.

But the biggest thing HD stock has going for it is superior merchandising and stores vs. LOW. On the downside, Home Depot stock is more expensive than Lowe’s stock by a number of measures, including its forward price-to-earnings (P/E) and price-to-sales (P/S) multiples.

So, how does the competition stack up?

LOW Stock

Lowe’s must get tired of being an also-ran to Home Depot stock. LOW stock trails HD stock over pretty much any extended time frame you care to look at. However — and this is crucial — there is more than enough room to support both HD and LOW in this market. LOW might be No. 2, but it still books more than $50 billion per year in revenue.

True, LOW missed Street expectations, as earnings came up short by 2 cents per share; that’s never very reassuring. Revenue likewise missed estimates. But more importantly, LOW said May sales were much improved. Additionally, LOW lifted its profit outlook and maintained its guidance for revenue growth of 5% this year. That keeps LOW on track to grow earnings per share by at least 20% in fiscal 2014.

In other good news, Lowe’s said gross margin expanded to 35.5% from 34.8% (that’s a lot). Following Home Depot’s lead, LOW is also making better choices on merchandising, which helped lift those margins and protect the bottom line despite the bad weather.

Finally, as good as HD stock has been as a long-term holding, LOW stock hasn’t been a slouch. Lowe’s stock beat the S&P 500 by 20 percentage points over the last five years.

The Verdict

Ideally, you would own both Home Depot stock and Lowe’s stock. They’re subject to the same economic forces and essentially trade in line with each other. If one stumbles on something company-specific, the other can act as a hedge.

But if you have to chose just one, HD stock is still superior to LOW stock. True, Lowe’s stock beat the broader market by 30 points over the past five years, but Home Depot stock clobbered it. HD stock has outperformed the S&P 500 by 110 percentage points since May 2009.

HD stock also looks to be of higher quality than LOW stock, with a return on equity of 36% vs. 18% for Lowe’s.

Finally, HD is more expensive than LOW … but not by much, and it deserves the higher valuation. HD is better at merchandising than LOW. It also gets better marks for its stores. The forward P/E of 15 isn’t much higher than the 14 for LOW stock. Besides, that valuation still makes Home Depot stock cheaper than the broader market despite having much better growth prospects.

LOW stock might very well be a good investment … but HD stock is even better.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.